The Daily News. SATURDAY, DECEMBER 28, 1918. THE MORATORIUM.

Taranaki Daily News, 28 December 1918, Page 4

The Daily News. SAT URDAY, DECEMBER 28, 1918. THE MORATORIUM.

On August 14,, 1914, there came into force in New Zealand, an Act which was intended to prevent financial difficulties that would be caused by the calling in of mortgages. This enactment provided that, so long as a state of war 'existed in the Dominion, and for six months after the war ceased, a. mortgage could not be called up without leave of the Supreme Court; that .uo power of sale could be exercised by a mortgagee or any action commenced for breach of covenant for non-pay-ment of interest, or for higher interest than the reduced rate, if sir**,,provided in the mortgage for punctual, payment of interest. Naturally the measure was entirely in the interest of those who borrowed and there can be no question that it was a prudent and necessary measure. There was, of course, not the slightest idea that the war would be so prolonged, so that possibly the lenders of money on mortgage may have been occasionally inconvenienced. On the other hand it is conceivable that had not this legislation taken place there would, as the days of the struggle lengthened, have been a general, calling in of mortgages in order to obtain a higher rate of interest, and not only would great hardships have been caused, but industrial affairs would ha.ve suffered considerably. Money lenders, as a rule, are not slow to take advantage of favorable opportunities for increasing their profits. It is their business to get as good a return for their capital as possible, so that when JjsmUe jw teoke out it is

quite likely tjjey would have been pspared to reap a rick harvest at the expense of the borrowers. The moratorium, therefore, was a great boon to those who had. been obliged to give mortgages over their property, for it ensured their freedom from worry at a time when it would have entailed the greatest difficulty in obtaining ,fresh mortgages at reasonable rates, and probably, in many cases, ruin would have stared them in the face. In fixing the limit of the existence of the Moratorium to six months after p'eaee was declared, breathing time Avas given after the war toenable normal conditions to be once more in vogue. There has now been launched an agitation in Auckland for the removal of the restrictions imposed by the Act, on the ground that as it was a war measure, to allow it to remain in force any longer would be giving borrowers an unfair advantage. The very fact that this plea has been put forward shows how necessary the Act was, and where the alleged unfair advantage comes in would be difficult to logically determine. The war is not yet over, there being merely a cessation of hostilities during the currency of the armistice and until peace terms are signed by the belligerents. It has been stated that in all probability peace will' not be declared till April next, so' that if this proves to be correct, then the moratorium would be in force until October next when it' would automatically cease. The matter lias, like all others, two sides , .m which it can be viewed, but the dominant principle'is the protection of the borrowers, and from that point of view it would seem that the full period mentioned in the Act is not any too long. Instead of giving the borrowers an unfair advantage it is securing for them a fair and square deal. If the contentions of the advocates of the removal of the restrictions are examined they will clearly indicate the overeagerness of the lenders to call in their secured loans. As many of these loans have been advanced to smail farmers and others who would at present find it next to impossible to obtain fres'i advances, the progress and prosperity of the country would be seriously jeopardised. It is claimed that there is ample money to meet fresh demands; that mortgagees and investors will not invest largely while the moratorium exists; that there is at present more money lying comparatively idle than ever before, waiting suitable mortgage*; that there is no risk of an increase in the rate oil Interest should the moratorium be lifted. To all of which arises the question why, if all this money is • idle (comparatively—that is earning very little interest), and the rates of interest are not to rise, is the outcry for the lifting of the moratorium being made? Also how are the borrowers who have the protection of the moratorium, receiving unfair advantages? The claim for the removal of the restrictions is j manifestly untenable, especially in view of the fact that the end of the moratorium ia in sight. l't is also put forward that the payment of an indemnity by Germany will keep the money market steady, but that ignores the fact that it will probably be necessary to take a large portion of that indemnity in raw material, besides which there is no possibility of auy money from that source'eomint* to the Dominion being available for loans by the State Advances Office, The agitators have no just, 'ground for their action. There is not the slightest reason why the period prescribed by the Act should be curtailed. An obvious course is open to those who want to call in their money, namely, to find, amongst the owners of the large sums they state ere anxiously awaiting investment, those who will take a transfer (at the mortgagees' cost) of the present advances. But what will they gain if the rate of interest remains no higher than the minimum under the existing mortgages? If their arguments are reliable they will be worse off than before, but it is so plainly evident that they are hoping for large.? returns. It b human nature &o to do. The Government can hardly be expected to play into (heir hands, and to do so would be a distinct, breach of faith. It does not require much ingenuity to arrive at the real reasons on which tho agitation is based. The arguments advanced for the repeal of the Act may be ingenious but can scarcely be called ingenuous.